Alibaba has another blockbuster quarter

After a strong week, the DAX is slowing down today and losing some of its momentum, quoting a downward movement. The German Index started out strong but reverted back to the mean very quickly. 2 hours before close, the German DAX is down 0,20% from its previous close. A reason for this cool down in the German markets might be that German investors are on their tiptoe amid the AirBerlin and Lufthansa deal. Oil and Gold are down 0,39% and 0,22% respectively.

In the U.S. the bulls began trading yesterday with a new head of steam, as the leading averages all moved out to impressive early gains. On point, after we had passed the first half hour of market action, the Dow Jones Industrial Average had rung up a gain of some 70 points. Modest rallies also were under way on the S&P 500 and the NASDAQ. Also, yesterday, unlike Tuesday, the S&P Mid-Cap 400 and the small-cap Russell 2000 were comfortably in the black, as well. As to the Fed minutes, Wall Street was looking for clues about the Fed’s interest rate intentions. The report, meantime, suggested that there was now a split developing on the Fed regarding whether to tighten the monetary reins again this year, citing concerns about low inflation balanced out by improving GDP growth. Our sense continues to be that the Fed will raise rates just once more in 2017, and that such an adjustment might not come until late this year. Meantime, the market’s advance remained in place as the morning wound down, with the Dow’s advance holding in the 60-85 point range as noon arrived in New York. The NASDAQ, up haltingly early in the session, strengthened as the afternoon approached, with its advance surpassing 25 points. The stock market then stayed near the upper levels of its range for the next hour, or so, but ill winds politically, as other companies now have decided to abandon the President’s manufacturing council following last weekend’s violence in Charlottesville and the Administration’s changing response to it, fueled some selling as the 2:00 PM hour approached. In all, the Dow’s advance went from more than 85 points down to fewer than 30 points at one time. Still, the market had a generally strong tone to it, which suggested at the time that unless the minutes held some unwanted surprises, the day would end higher for stocks. The Fed minutes had little impact, with stocks initially rising then pulling back, with the Dow’s gain at one point nearly evaporating. Our thinking is that this Fed release will have little meaningful impact, with political headwinds probably more of an influence at this moment on market behavior. Traders, meantime, then backed off somewhat as we headed into the close, with the Dow ending the session ahead by a modest 26 points, while the NASDAQ, which waxed and waned late in the day, finally ending matters up by 12 points. Meantime, the Russell 2000, once ahead strongly, edged down a trifle at the conclusion of the day’s action.

Walmart has poured billions into its e-commerce and tech to integrate its digital business with its stores, and the strategy is paying off handsomely. The retailer said comparable sales at its 4,000 U.S. stores, a $300 billion a year business, rose 1.8% on the year in the three months to June, well above Wall Street expectations for 1.3% according to Consensus Metrix. That gave Walmart U.S. its 12th straight quarter of growth. More crucially for the world’s largest retailer, shopper visits also increased, rising 1.3% and showing that Walmart’s massive investments in features like grocery curbside pickup, in-store order retrieval, its own mobile payment app and the expansion of its online assortment are spurring shoppers to come into stores. In an effort to be able to compete with Amazon, Walmart made some big investments in its e-commerce division. But investments, along with more aggressive pricing generally, cost money. The company disappointed Wall Street with a profit forecast of 90 cents to 98 cents per share for the current quarter, compared with the 98 cents analysts expected. Wal-Mart Stores shares, which had been on a tear of late, slipped 1.5% in pre-market trading. “Sales growth is coming from across the business – including stores, e-commerce and a combination of both,” CEO Doug McMillon said in a statement. The chain also got a boost from its massive grocery business, which generates 56% of its revenue. Food saw its best quarter in five years, aided in large part by an overhaul of the fresh food business that aimed at better competing with the likes of Whole Foods Market, which is being acquired by Amazon. Other bright spots for the company included the performance of Sam’s Club, which chronically underperforms its rival Costco Wholesale. Comparable sales, a metric that strips out the impact of newly-opened or closed stores, rose 1.2%, but shopper traffic was up 2%. Further afield, nine of Wal-Mart Stores’ eleven markets saw comparable sales increases, including a first rise in sales in three years at its Asda unit in the U.K. Still, the investments took a toll: Walmart earned $1.08 per share, slightly above $1.07 expected by analysts and roughly on par with a year-ago levels. Total sales were $123.36 billion, a hair above the $123.15 billion markets were expecting. Short after opening Wal-Mart is down 2,20%

Ireland’s finance minister said the European Commission’s demand that Dublin collect up to €13bn in back taxes from Apple was unjustified, in an interview with Germany’s Frankfurter Allgemeine newspaper. The European Commission ordered Apple to repay taxes to Ireland after ruling last year that the US technology company paid so little tax on its Ireland-based operations that it amounted to state aid.

Cisco reported FY4Q17 earnings on 8/16, after the close. Revenue and EPS came in as expected. Looking at revenue by products, there are puts and takes but nothing major to note. Gross margin for the quarter came in at 63.7%, or 20 bps lower than expectation, while non-GAAP operating margins came in 40 bps ahead of expectations at 31.5%. However, guidance is a tad weak. FY1Q18 revenue and EPS are about in-line, but non-GAAP gross margin was guided to 63-64% vs. 64.1% consensus, and non-GAAP operating margin was guided to 29.5%-30.5% vs. 31.3% consensus. Overall, the quarter is uninspiring, which is reflected in the stock trading down 2.5% in the aftermarket on high volumes.

Alibaba had another blockbuster quarter of business as its profits almost doubled. The Chinese e-commerce giant reported net profit of 14 billion RMB ($2.1 billion) for its recent quarter that finished June 30 — that’s up 96 percent year-on-year. Total revenue grew 56 percent to reach 50.2 billion CNY ($7.4 billion), easily exceeding estimates, with the firm reporting 466 million active buyers over the previous 12-month period. Alibaba’s core commerce business brought in the majority of revenue — 43 billion ($6.4 billion) — but its 58 percent annual growth was topped by its smaller business units. That’s a sign of the future, according to CEO Daniel Zhang. “Alibaba had a strong start to fiscal 2018, reflecting the strength and diversity of our businesses and the value we bring to customers on our platforms. Our technology is driving significant growth across our business and strengthening our position beyond core commerce,” Zhang said. Of those units, its aggressive cloud computing business, which TechCrunch profiled earlier this year, was one of the more impressive. It grew 96 percent to reach 2.4 billion RMB ($359 million) in revenue while losses narrowed to 103 million RMB, or $15 million. The company noted that its cloud computing customer base passed one million for the first time. Alibaba’s digital media and entertainment business, which includes video service Youku Tudou, saw revenue jump 30 percent to four billion RMB ($602 million). The company has spent the past year expanding its business outside of China, which this quarter again shows accounts for the lion’s share of revenue, and the results are beginning to bear fruit. Alibaba said its international e-commerce services reached “meaningful scale” with 2.6 billion RMB ($389 million) in revenue. It credited Lazada, its business in Southeast Asia which it recently invested a further $1 billion in this year, and AliExpress for increasing revenue by 136 percent from last year.

 The Earnings Outlook for tomorrow are Deere with an Actual EPS of 1,95, Foot Locker with an EPS of 0,902.

Todays Economic Calendar:

I) Jobless Claims

II) Industrial Production

III) Leading Indicators

IV) Fed Balance

V) Money Supply

 

 

 

Ryanair files anti-trust complaint

1. DAX Review
2. U.S. Review
3. Ryanair files anti-trust compliant
4. Amazon 16 billion bond release
5. Gigaset Earnings
6. Economic Calendar

In case you missed out Elliott Wave Technical Analysis Report, make sure to catch up on it.

The DAX is recovering from its recent losses. 3 hours before close the German Index is up by 0,83% reaching the 12278 point mark. With this actual form it does seem that the DAX will be breaking its August high. There are no major international signals, as the Brent and Gold seem have to stabilized at 50 USD and 1270 USD respectively.

Following a strong equity market rally on Monday, as simmering tensions eased a little with North Korea, and fears of an imminent armed conflict with that nation lessened to a degree, Wall Street calmed down a bit yesterday morning, too. Indeed, after a small early extension to the rally in the first few minutes of yesterday’s session, stocks faltered somewhat within the first hour of trading, and an early 35-point gain in the Dow Jones Industrial Average quickly faded, with that blue-chip composite falling into the red during the second hour of trading. The other averages went into the red, as well. Meantime, a big individual story, one day after the shift away from North Korea, was at giant home improvement retailer The Home Depot, which issued quarterly results yesterday. And while the top and bottom-line results were better than expected, the gains, and the raised full-year forecast did not satisfy the Street, as that stock tumbled, losing nearly 4% of its value early on. The loss in HD turned the Dow negative, costing that index some 40 points. However, after that initial turn down by the Dow, that index returned to the black shortly thereafter. Also in the retail category weak earnings hurt Coach stock in early dealings. Still, the resilience of the bulls was evident yesterday, with that late-morning attempted comeback in the Dow. Meanwhile, in other market moving news, the Commerce Department reported that retail sales had posted an increase of 0.6% in July. That was above the 0.4% rise forecast. Also, June’s result was pared back from a rise of 0.4% to one of 0.3%. Excluding motor vehicle sales, core retail spending was ahead of 0.5%. Here, too, the gain was above consensus. Contributing to the pickup were sales of furniture and home furnishings, and building materials. Sales over the Internet soared, meantime, advancing by 1.3%. The market remained in somewhat of a mixed pattern as the noon hour arrived in New York, with the Dow near the breakeven line, and with the S&P 500 and the NASDAQ each off incrementally. The small-cap Russell 2000 and the S&P Mid-Cap 400 also were in the red, but in a more meaningful way. As has been the case recently, it was the retail group suffering once again, with steep losses in some high-profile names, such as Under Armour. Also, more stocks were lower than higher on the Big Board at that time, by a count of two-to-one while among the core groups, energy, basic materials, and consumer stocks were leading things lower. The weak tone persisted through the middle of the afternoon, and while the Dow held near the breakeven line, and the large-cap S&P 500 and the NASDAQ were just down incrementally, the smaller indexes and the advance-decline ratio were notably off. It was, to that point, a somewhat sobering day, even as the economy continued to show relative strength and the news out of North Korea was somewhat reassuring, for now. The equity market then would firm up slightly as the session wound down, but the overall weaker tone would persist into the close. When all the numbers were in, the Dow, with some last-minute selling, would end the session ahead by just five points; the S&P 500 would conclude matters just about where it began them; and the NASDAQ would end the day off seven points. Losing stocks easily led gains, though, and the small- and mid-cap categories showed noted weakness.

Germany on Wednesday rejected a claim by budget airline Ryanair of a conspiracy behind efforts to keep bankrupt rival Air Berlin afloat until a new owner is found. The Irish airline lodged a complaint with European Union competition authorities after Air Berlin filed for bankruptcy protection and then got a 150 million euro ($177 million) loan from the German government. Ryanair said late Tuesday there’s “an obvious conspiracy” between the German government, Lufthansa and Air Berlin. The loan will help Air Berlin to keep flights running for the next three months, while it is negotiating a possible deal with Lufthansa and another unnamed carrier, reported by German media to be easyJet. A spokeswoman for Germany’s Economy Ministry said it was “absurd” to claim that the rescue package had been staged. Beate Baron told reporters in Berlin that the government expects the loan to Germany’s second-largest airline to be repaid. Air Berlin filed for bankruptcy protection Tuesday after its main shareholder, Abu Dhabi-based Etihad, said it would make no more financing available following years of unsuccessful turnaround attempts. The airline, which carries some 80,000 people a day mostly on short-haul destinations, made a loss of about 782 million euros last year.

Amazon.com Inc. on Tuesday completed a $16 billion bond deal to fund its planned $13.7 billion acquisition of Whole Foods Market Inc. The issue came a day after ratings agency Moody’s Investors Service assigned the deal a Baa1 rating and revised Amazon’s credit outlook to positive from stable. S&P Global Ratings assigned the credit a higher rating of AA-minus last week. Amazon raised $16 billion in a seven-part offering that included a 40-year tranche, underwritten by Bank of America Merrill Lynch, Goldman Sachs and J.P. Morgan Chase. As expected, the bonds priced at the tight end of guidance, but the new concessions were still attractive, according to research firm CreditSights, which had upgraded its recommendation on Amazon’s bonds to outperform from underperform based on the initial price talk. Initial price talk on the 10-year tranche was 110 basis points above comparable Treasurys, which later tightened to Treasurys plus 90 basis points. CreditSights analysts led by Jordan Chalfin said at the price, the notes were still a bargain.

Gigaset reported a drop in first-half sales and EBITDA but reiterated its outlook for higher sales over the full year, thanks to growth in new market segments like smartphones. In the first half, smartphone revenues rose to EUR 3.7 million from EUR 1.1 million a year earlier, following the launch of two devices. Over the first six months of 2017, total revenues fell 3.6 percent to EUR 128.3 million due to a continued contraction in Gigaset’s main market, cordless home phones. Sales in the consumer segment fell to EUR 98.1 million from EUR 110.7 million a year ago, while the business market grew 25.7 percent to EUR 25.4 million, driven by strength in its home market Germany.  EBITDA fell to EUR 5.7 million from EUR 10.6 million in the first half of 2016, hurt by increased spending on marketing and R&D, including the ramp-up of mobile sales. Excluding the extra EUR 4.6 million in costs, EBITDA would have been largely stable for the full year, Gigaset said. Free cash flow was a negative EUR 24.1 million versus an outflow of EUR 13.1 million a year earlier.  Despite the lower H1 results, Gigaset maintained its outlook for higher revenues over the full year, with a low double-digit million euro increase thanks to the expanding smartphone business. Core EBITDA is expected to reach EUR 15-25 million over the year, while cash flow should be just a mid single-digit million euro outflow.

Today Economic Calendar:

1. MBA Mortgage Applications
2. Housing Starts
3. Atlanta FED Business Inflation Expectations
4. EIA Petroleum Status Report
5. FOMC Minutes

 

Technical Analysis: Elliott Waves

In todays Weekend Special Edition we will be discussing Elliott Waves. For some technical analytsts Elliott Waves are a vital tool. As any investor the Technical Investor will want to have a reliable forecasting method. The possibility of easy profits by forecasting the market has been the underlying force that motivates so many investors. Elliott’s market model relies heavily on looking at price charts. Practitioners study developing trends to distinguish the waves and waves structures that we will refer to later in this article. The application of the Wave Principle is a form of pattern recognition. To obtain a full understanding of the Wave Principle including the terms and patterns, I recommend Elliott Wave Principle by A.J. Frost and Robert Prechter.

The Elliott Wave Theory was introduced by Ralph Nelson Elliott during the 1930’s. Elliott a full-time accountant believed that stock trends follow a repeating pattern which can be forecasted both in the long and in the short term. The Elliott Wave Theory was published in his book “The Elliott Wave Principle” in 1938. Using data from stocks he concluded that what seems to be a chaotic movement, actually outlines a harmony found in nature. Elliott’s discovery was completely based on empirical data, but he tried to explain his findings using psychological reasons. The main principle of this theory was that a pattern consists of eight waves as can be seen in the Image below.

It is visible that Wave 1, Wave 3 and Wave 5 follow the cyclical trend while waves 2 and 4 correct the underlying trend waves A, B and C correct the overall trend , while Wave A and C follow the correction and Wave B resists. Elliot observed that each wave consists of smaller waves which follow the exact same pattern as is shown in the Image below, thereby forming a super-cycle. The numbers in the Image represent the number of waves when counted in a different scope. For example the whole diagram represents two big waves, the impulse and the correction. The impulse consists of 21 usb-waves which in turn consist of 89 smaller waves, while the Correction wave consists of 13 sub-waves, which in turn, consist of 55 even smaller waves. As can be observed all of the above numbers are part of the Fibonacci series. According to the Elliott wave theory, when Elliott first expressed his theory he was not aware of the Fibonacci series.

Elliot believed that there are nine cycles, of different durations, the bigger of which, is formed by the smaller ones. From the largest to the smallest cycles there are:

1. Grand supercycle: multi-century
2. Super-Cycle: multi-decade (40 to 70 years)
3. Cycle: one year to several years
4. Primary: a few months to a couple of years
5. Intermediate: weeks to months
6. Minor: weeks
7. Minute: days
8. Minuette: hours
9. Subminuette:minutes

The duration of these cycles varies from minutes to decades. Each pattern (cycle) is outlined by the following rules:

1. The Second Wave cannot be longer than the first wave and cannot return to a lower price than that set at the beginning of the first wave
2. The third wave is never the smallest wave compared to the first and the fifth.
3. The fourth wave does not return to a lower price than the price found at the end of the first wave. The same applies for wave a.
4. Usually the third wave shows a greater dynamic, except in some cases where the fifth wave is extended (the case when the fifth wave is made up of five smaller waves)
5. The fifth wave usually leads to a higher point than the third.

When it comes to the interpretation of the waves we will present a short overview of the general dynamic of the waves. The first wave is the “new beginning” of an impulse. Opening a position at this point will be the most profitable scenario. It is difficult to differentiate it from a correction of a previous downtrend, and therefore it is not a powerful wave. Most investors prefer to wait for better timing. The force behind the wave pattern is the number of investors that decide to enter and exit the market at a given time. After some initial winnings, investors decide to exit the market as the price becomes higher, and the stock becomes overpriced for these few investors. This behavior translates in the second wave. As the price begins falling, the stock becomes more attractive for a great number of investors that regretted not having entered the market during the first wave. As the price begins falling, the stock becomes more attractive for a greater number of of investors that regretted not having entered the market at a higher price. Those who entered in the beginning of the wave, are satisfied with their winnings, and have most likely exited the market. Investors realize that the price has reached a level making it difficult to attract any further investors. Demand begins falling, which leads to the fourth wave. Major investors are out of the market, waiting for the end of the fourth wave, to enter again and reap in the profits of the fifth wave. It is important to note that the fourth and the fifth wave are the easiest ones to follow, as they come after the third wave which is the easiest to spot, due to its length, power and speed. Major investors have bought stocks on lower prices, from investors that had bought them during the end of the third wave who feared the price might go lower. However as the major investors enter the market again, they create a small hype, the fifth wave, smaller than the third wave, which usually reaches the peak of the third wave and sometimes even higher. Investors who know the market, know that the market is extremely overrated and therefore have exited the market. Wave A is a corrective wave which is often mistaken for a second wave. This explains wave B. Smaller investors think that wave A corrected the price enough, so that it can lead to an upward trend. Unfortunately, this is the Wave where most smaller, and occasional investors lose huge amounts of money, as Wave C starts, pushing the price lower until the price gets underrated again, for a new pattern to start.

The above explanation is by no means a statistical explanation of the wave behavior, but explains the difference between major and occasional investors and their knowledge of the market. It is exact to know the exact wave patterns , otherwise it is very easy to misinterpret signs. It is important to note that the following explanation regards an overall impulse trend. The opposite would happen in case of an overall correction.

Atsalakis et al (2011) compared the Elliott Wave principle to a Buy and Hold Strategy with remarkable results. The Elliott Wave Principle was tested with the stock of the National Bank of Greece. A paper portfolio worth 10.000 Euros was simulated. Buy and sell decisions did not take into account the confidence index, as it is subjective, depending on the risk the investor is willing to take, even though a threshold of 52% is widely acceptable. Stocks were bought whenever the forecast was positive, and the position was closed when the forecast became negative. Transaction costs were not taken into consideration. The system was tested for period April 2007 to November 2008, for a total of 400 trading days.s. It is worthy to note that this period also includes the great recession of October 2008, were the system achieved interesting results. For the whole period of 400 trading days, the hit rate was 58.75%, mainly due to the crisis. By breaking this period in four sub-periods of 100 observations, the hit rates achieved are 58%, 64%, 60% and 53%, respectively. During this period of 400 trading days, the WASP system made 63 transactions. This gives a rough average of 1 transaction every 6 days.